International Business Cycle Synchronization Research Articles

`Mode-locking' and international business cycle transmission

We investigate international business cycle synchronization. Business cycles in many countries have a tendency to synchronize with one another in what appears to be a world business cycle, yet researchers find that trade and capital linkages are not strong enough for one country to `drive' business cycles in another country. How is this world business cycle formed? This study suggests that the world business cycle results from a `mode-locking' phenomenon, a nonlinear process by which weak coupling between oscillating systems tends to synchronize oscillations in the systems. Simulations and econometric analyses are performed to attempt to verify this hypothesis.

The role of information and the international business cycle

This paper explores an equilibrium imperfect information model of the business cycle under floating exchange rates with perfect international capital mobility. While international trade in goods takes place in decentralized markets, foreign exchange and international debt are traded in centralized markets. The paper investigates the degree of international business cycle synchronization, the covariation between the exchange rate and the terms of trade and the degree of insulation provided by floating exchange rates. In sharp contrast to sticky price Keynesian type models, unanticipated monetary shocks will induce synchronized cycles, given sufficient elasticity conditions. The amplitude of the business cycle will depend upon the covariance matrix of stochastic schocks.